All it Takes is a Little Perspective

Whoa, did I just promise you too much? I mean, did you see that last post? Retiring as early as 30!? Bullshit! What’s this guy trying to sell me?!?

Okay, lets slow down a bit. I am not trying to convince you that everyone should be retiring at 30. I mean, some of you may be 30 right now and just happened to have found this blog.

There are also the rare few who geniounly love their jobs and would have their life be well spent in a 40+ year career.

However, too many of us have a different experience in our professions. We grind through our monday to friday sentence. Our real life does not begin until friday at 5 o’clock.

And if the money stopped flowing in? We would stop partcipating in our jobs immediatly.

The main point I do strive to get across is that financial freedom (aka, the end of mandatory work) should not be anymore that 10-15 years away. That is, for anyone who has their financial life together, and as it turns out this is very easy to do.

Imagine for a second what you would do if you could enjoy a lengthy 50-70 year retirement. Every day would be yours for the taking. You could ride a bike, start a family, travel, or even start a blog! Together we are going to get there. With a few simple tune-ups in our financial systems, we will be flying free in no time.

So how does the average Joe pull this off? Starting a business? Insurance settlement? Nope, the answer is simple, save at least half your income.

That’s right, HALF your take home pay, straight to your bottom line.

As you read this blog, you will begin to understand the nature of the U.S. middle class lifestyle, and how very wasteful it truly is. Most people manage to save very little of their income, if any at all. You hear about saving 5%, or if you are ambitious, 10%. People seem to be scraping by, paycheck to paycheck, yet their homes are filled with junk they do not use, half their grocery bill goes to packaging, and they treat gasoline like it is 25 cents a gallon and great for the environment. This is all bullshit. There is no reason not to be saving at least 50% of your income.

You CAN put away half your income, at least. All it takes is a little perspective twist. You have to begin viewing your finances in a way that focuses on long-term happiness. By focusing on your true lifetime happiness, you develop an awareness of what you really need and what is just “fluff”.

Fluff is a kinder word for complete bullshit that either delivers to you a temporary feeling of “yum!” or “whoo”, or even makes you feel higher status for a bit. These positive feelings are followed by having either a slightly flabbier physique or a new depreciating object laying around. This object is added to a collection of ever growing objects that for some reason don’t deliver those positive feelings anymore. Now they take up your space and time until one day it is decided it is better off in a landfill.

“yeah yeah, minimalism will save you money and free up your life a bit, but how do I retire early with the few bucks I would save?”

Most people who take a good hard look at their finances quickly realize that a portion of their income is being spent on conveniences and temporary pleasures. These are things that in no way contribute to your long-term happiness. For some it may seem insignificant to cut out the $4 lattes and fast food meals. I mean, these little expenses are just that, little expenses, right? Pitter patter pocket change, does it really make a difference if I save a few bucks here and there?


Don’t believe it?

Lets broaden our financial lenses a bit. I want you to start thinking about your finances in the long run, not on a weekly/monthly basis like most people mistakenly do. Start thinking about your finances on a 10 year basis. That’s right, a whole decade. Magical things begin to happen when you do this. You begin to see the true impact of these “pitter patter” decisions.

A coffee habit of 3 drinks a week a $4 a pop sets you back $12 a week or $48 a month. Not too shabby, right. But wait, lets step back and apply our broader viewpoint. I know the technology exists to easily and conveniently brew my own coffee, and if it doesn’t taste as great as Starbucks, I have the opportunity of honing the skill of brewing my very own kickass cup of Joe.

So we have established that Starbucks is not providing anything of value, because you can get the same product via your own means for significantly less. Since I know taking away these $4 drinks won’t effect my happiness, how much can I be saving?

$48 a month, times 12 months in a year, times 10 years is $5760!!!

If you are an average wage earner and make 50k a year, this is a month’s worth of mandatory work. All for a product that isn’t actually providing anything of value!!

but wait, it gets much better

Let’s say I have $10 to spare, AND I have student loans at 6% interest. Here I have a few choices. I could go for a meal at Chipotle or to the mall for some knick knacks, or I could put it toward my debt. If I take that $10 and buy a burrito and Coke at Chip, I will presumably receive $10 worth of food and pleasant dining experience. On the other hand, if I reduce my 6% debt by $10 I will save interest payments of 6% one $10 FOREVER. Adding 6% interest on 10 dollars over ten years is 10xe^(.06×10)=$18.22. That meal at Chipotle is starting to look awfully expensive, isn’t it?

If you think that example is too small,. Imagine spending $100 at the mall while you are $2500 in credit card debt. Interest on CC debt runs about 17% (shit!) that $100, if put towards the debt, saves you 100xe^(.17×10)=$547 over ten years!? How important are those brand names at the mall worth to you!? Do they make you happy enough to fork over $547?!

What we can take away from these examples is some understanding of compound interest. Understanding the effects will transform your viewpoint on every purchase that you make (or not make). With this, you now can make more informed decisions about where to allocate your money. You will find yourself spending less on the things that do not add to your long-term happiness. I mean, Chipotle is good, but is it $18.22 good?

This concept of future value of money is not only true if you have debt to kill, but also if you are debt free. You see, the value of your money is a dependent variable, it is dependent on TIME. This means that each dollar you have, if stashed away properly, will be worth more with time. I am not talking about picking stocks, I am talking about taking your idle cash (those bills sitting in your savings account) and putting them in a place where they will work for YOU. Imagine that, each dollar bill a little employee that works to earn you more money. This can easily be done through paying down high interest debt (saving you from paying interest) and purchasing diversified index funds, like the Vanguard VFINX.

Think investing too risky? No, TRADING is risky, but investing for the long haul allows your money to work for you. Take a look for yourself at the history of the market, you will find a wide array of up years and downs years, maybe even 3-5 year spans that are down. However, take a look at what always happens in the long run (10+ years). We will learn more on this later, but the bottom line is the market is more predictable than you think.

So these little saving here and there not only add to your wealth, they add to the group of tireless dollar bill employees you could have working for you around the clock.

Let’s go back to our coffee example, which we figured out sets us back $5760 over a decade. If those savings where say, invested each week instead of being thrown into a savings account, now we are talking about $9024!

This is nearly two months mandatory labor for an average wage earner! And just from this ONE tiny life decision that does not take away any level of happiness!

Are the alarm bells ringong in your head yet?

Through this new filter, you may find yourself cutting spending on many aspects of your life. How much does cable contribute to your happiness, or that unlimited data plan?

This change in attitude alone can cut your expenses in half. We will spend plenty of time talking in more detail on how to save half your take home pay. For now, just begin to focus on what contributes to your lifetime happiness.

It will be important to note that there will be things you continue to buy even with this new filter on your spending. These purchases will continue because you know they are things you value and add something positive to your life. I personally save about 75% of my income, even though I blow hundreds of dollars each year on snowboarding, beach trips, and delicious organic Fuji apples!

Whew! That was a good start. With your new perspective on money, you now have something infinitely more powerful than any financial nuts and bolts. Mastering your spending will get you 90% of the way there. Now we can dive in and get some of the dirty details on exactly how this financial freedom stuff works. With a little more fine tuning, we could all start saving as much as 75% of our income!

The fun begins!